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Philippine Tax Facts: R.G. Manabat & Co
Philippine Tax Facts: R.G. Manabat & Co
TAX FACTS
Corporate Tax
CORPORATE INCOME TAX
Tax rate
Domestic corporations Resident foreign Non-resident foreign 30% of gross income
(on all income whether corporations (on all corporations or NRFCs (on all
from within or outside Philippine-sourced Philippine-sourced income)
the Philippines) income)
Minimum corporate income tax (MCIT) beginning on the 4 th taxable year immediately 2% of the gross income
following the year in which the corporation commenced its business operations, when
the MCIT is greater than the RCIT
Improperly accumulated earnings tax (IAET). This is imposed when the accumulated 10% of the improperly
earnings of a corporation are in excess of 100% of the paid up capital. accumulated taxable
income
The IAET does not apply to listed corporations, banks and non-bank financial
intermediaries, insurance companies, companies registered with the Philippine
Economic Zone Authority (PEZA), or pursuant to the Bases Conversion Development
Authority (BCDA), or other special economic zones.
Payments to non-resident alien individuals not engaged in trade or business in the Philippines
Gross amount of income derived from all sources within the Philippines such as interest, cash 25%
and/or property dividends, rents, salaries, wages, premiums, annuities, compensation,
remuneration, emoluments, or other fixed or determinable annual or periodic or casual gains,
profits and income and capital gains
Gross income received by every alien individual and Filipino (subject to certain 15%
conditions) occupying managerial or technical positions in RHQs/ROHQs and
representative offices established in the Philippines by multinational companies, as
salaries, wages, annuities, compensation, remuneration, and other emoluments, such
as honoraria and allowances, except income which is subject to the fringe benefits tax
Payments to NRFCs
Gross income derived from all sources within the Philippines such as interests, 30%
dividends, rents, royalties, salaries, premiums (except reinsurance premiums), annuities,
emoluments, or other fixed or determinable annual, periodic or casual gains, profits
and income and capital gains (except capital gains realized from the disposition of
shares of stock in any domestic corporation)
Profit remitted by the Philippine branch of a foreign corporation to its head office abroad 15%
based on the total profits applied or earmarked for remittance without any deduction for
the tax component except those registered with the PEZA and other companies within
the special economic zones
Cash and/or property dividends 30% in general. May be
lowered to 15% if the
country of the recipient
allows a credit against
the tax due from the
NRFC on taxes deemed
paid in the Philippines
CAPITAL GAINS TAX (CGT) (also see primer on Avoidance of Double Taxation)
Tax rate
On capital gains presumed to have been realized from the sale exchange or other disposition 6%
of real property located in the Philippines and that are classified as capital assets
On the net capital gains from the sale of shares of stock in a domestic corporation not traded 5% if net capital
in the stock exchange gains is not over
P100,000.00
(For sale or other disposition of shares of stock listed and traded through the local stock
10% on any
exchange other than the sale by a dealer in securities, a tax at the rate of 1/2 of 1% of the
amount in excess
gross selling price or gross value in money of the shares of stock is imposed, which shall
of P100,000.00
be paid by the seller or transferor)
ALLOWABLE DEDUCTIONS
Benefit Limit
Personal Exemption P50,000 for the taxpayer
Additional Exemption P25,000 per qualified dependent up to 4
Optional Standard Deduction 40% of gross income
Premium Payments on Health and/or P2,400 for the taxpayer whose family gross income does not
Hospitalization Insurance exceed P250,000 for the taxable year
STATUTORY CONTRIBUTIONS
Income Bracket per Employer Employee
Government Agency
month (PHP) Contribution (PHP) Contribution (PHP)
Social Security System (SSS)3 Over 15,750 1,208.70 581.30
Philippine Health Insurance Inc. (PHIC)4 Over 35,000 437.50 437.50
Home Development Mutual Fund (HDMF)5 Over 5,000 100.00 100.00
1
As amended by Revenue Regulations No. 1-2015
2
As amended by Republic Act No. 10653
3
Effective January 1, 2014 per SSS Circular No. 2013-10V
4
Effective January 1, 2014 per PhilHealth Circular No. 027, s.2013
5
Per Rule VI Section 1 of Implementing Rules and Regulations of Republic Act No. 9679
Avoidance of Double
Taxation Agreements
NOTES
1
On 19 August 2013, the Philippine Supreme Court ruled that the requirement of prior Tax Treaty Relief Application (TTRA) to avail of tax treaty
rates may be dispensed with since a tax treaty takes precedence over an administrative issuance. However, the BIR has not yet formally
amended its requirement for the filing of the TTRA with the BIR’s International Tax Affairs Division (ITAD) prior to the occurrence of the first
taxable event to enjoy the benefits of the tax treaty.
2
This column does not include exemptions provided under the treaties on certain types of interest such as interest paid to governments, etc.
3
The 15% rate applies where relief, either by rebate or credit under Article 24 of the treaty is given to the beneficial owner of the dividends.
4
The 10% rate applies to interest arising in the Philippines from publicly issued bonds, debentures or similar obligations.
5
The 15% rate applies to royalties paid by an enterprise registered with the Philippine Board of Investments (BOI) and engaged in preferred
areas of activities. For the USA, the treaty provides a most-favored-nation clause.
6
The treaty provides certain conditions to be met before the exemption can be applied.
7
The 10% rate applies if the beneficial owner is a company that holds directly at least 10% either of the voting shares of the company paying
the dividends or of the total shares issued by that company during the period of six months immediately preceding the date of payments of the
dividends. For Japan, the 10% rate also applies to dividends paid by an enterprise registered with the BOI and engaged in preferred areas of
activities.
8
The 10% rate applies to interest arising in the Philippines from publicly issued bonds, debentures or similar obligations. The 10% rate likewise
applies to interest paid by an enterprise registered with the BOI and engaged in preferred areas of activities.
9
The 10% rate applies to royalties paid by an enterprise registered with the BOI and engaged in preferred areas of activities.
10
The 10% rate applies if the beneficial owner is a company that holds directly at least 10% of the capital of the paying company. Except for
Belgium, China and Czech Republic, the treaties exclude partnership. For France and Spain, the rate applies to voting shares (vis-à-vis capital).
11
The 15% rate applies if arising from the use of, or the right to use, any copyrighted work including cinematograph films or tapes for television
or broadcasting while the 10% rate applies in all other cases. For China and Germany, the 10% rate applies to royalties arising from the use of,
or the right to use, any patent, trade mark, design or model, plan, secret formula or process, or from the use of, or the right to use, industrial,
commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience. Further, for technology
transfers which are subject to approval under Philippine law, the contract giving rise to such royalties must be approved by the Philippine
competent authorities.
12
The 10% rate applies if the beneficial owner is a company (excluding partnerships) that holds directly at least 25% of the capital of the paying
company. For Germany, the rate applies to ownership (vis-à-vis holding).
13
The 15% rate applies if the beneficial owner is a company. For Brazil, it includes a partnership.
14
The 25% rate applies to royalties arising from the use or the right to use trade marks and cinematograph films, films or tapes for television or
radio broadcasting.
15
For Canada, the 15% rate applies if the company controls at least 10% of the voting power of the company paying the dividend. For Norway
and the United Kingdom, the rate applies if the beneficial owner is a company that controls directly or indirectly at least 10% of the voting
power in the company paying the dividends. For Finland, the 15% rate applies if the recipient is a company (excluding partnership) owning at
least 10% of the voting stock of the company paying the dividends. For India, the 15% rate applies if the beneficial owner is a company that
owns at least 10% of the shares of the company paying the dividends.
16
The treaty provides a most-favored-nation clause.
17
The treaty does not cover Hong Kong and Macau.
18
The 10% rate applies to royalties arising from the use of, or the right to use, any copyrighted work (other than royalties arising from the use of,
or the right to use, any copyright of cinematograph films, and films or tapes for television or radio broadcasting as 15% rate applies to the
same), any patent, trade mark, design or model, plan, secret formula or process, or from the use of, or the right to use, industrial, commercial
or scientific equipment, or for information concerning industrial, commercial or scientific experience.
19
The 15% rate applies to royalties paid by an enterprise registered with and engaged in preferred areas of activities, and also royalties in
respect of cinematographic films or tapes for television or broadcasting, and royalties for the use of, or the right to use, any copyrighted work.
20
The 10% rate applies if such interest is paid in connection with the sale on credit of any industrial, commercial or scientific equipment, or on
any loan of whatever kind granted by a bank (including other financial institutions for Netherlands), or on publicly issued bonds, debentures or
similar obligations.
21
The 15% rate applies if the beneficial owner is a company that holds directly at least 25% of the capital of the paying company.
22
The 10% rate applies if the interest is received by a financial institution (including insurance companies). The same applies to interest arising
from publicly issued bonds, debentures or similar obligations.
23
The 15% rate applies to royalties paid by an enterprise which is registered with the BOI.
24
The 15% rate applies if the beneficial owner is a company that owns at least 25% of the capital of the company paying the dividends.
25
The 15% rate applies if the recipient is the beneficial owner of the interest. However, interest arising in a Contracting State and paid to a
resident of the other Contracting State shall be taxable only in the other State, if the interest is paid in respect of (i) a bond, debenture or other
similar obligation of the government of that State or a political subdivision or local authority thereof; or (ii) a loan made, guaranteed or insured,
or a credit extended, guaranteed or insured by the Central Bank of the Philippines (BSP), or the "Bank Indonesia" (the Central Bank of Indonesia),
or any other lending institution, as may be specified and agreed in letters exchanged between the competent authorities of the Contracting
States.
26
The 15% rate applies to royalties paid by an enterprise registered with the BOI and engaged in preferred areas of activities.
27
The 15% rate applies to royalties paid by an enterprise registered with the BOI and engaged in preferred areas of activities and also to
royalties on cinematographic films or tapes for television or broadcasting.
28
The 15% rate applies if the royalties are paid in respect of the use of or the right to use cinematograph films and films or tapes for radio or
television broadcasting.
29
The 10% rate applies if the beneficial owner is a company (other than a partnership) that holds directly at least 25% of the capital of the
company paying the dividends. The rate also applies to dividends paid by enterprises registered with the BOI and engaged preferred pioneer
areas of investment.
30
The 15% rate applies if paid by a registered enterprise as well as royalties from the use of, or the right to use, cinematograph films, or tapes
for radio or television broadcasting.
31
The 10% rate applies if the recipient is a company the capital of which is wholly or partially divided into shares and which holds directly at
least 10% of the capital of the company paying the dividends.
32
The 25% rate generally applies to royalties including rental and those paid for the use of, or the right to use, motion picture films, films or
tapes for radio or television broadcasting. The 7.5% rate applies to gross rentals or amount paid for the use of or the right to use containers.
Further, this treaty provides a most-favored-nation clause. Moreover, the 10% rate applies to royalties paid by a company registered with the
BOI and engaged in preferred pioneer areas of investment.
33
The 15% rate applies if the beneficial owner is a company (excluding partnership) which holds directly at least 25% of the capital of the paying
company during the part of the paying company's taxable year which precedes the date of payment of the dividends and during the whole of its
prior taxable year, if any.
34
The 10% rate applies if the recipient is a company (excluding partnership) and during the part of the paying corporation’s taxable year which
precedes the date of payment of the dividends and during the whole of its prior taxable year (if any), owns at least 25% of the outstanding
shares of the voting stock of the paying corporation.
35
The 10% rate applies if the royalties are paid by an enterprise registered with the BOI and engaged in preferred pioneer areas of activities. The
15% rate applies if royalties are, in respect of cinematographic films and tapes for television of broadcasting. The 25% rate applies in all other
cases.
36
The 15% rate applies if the recipient is a company (including partnership) and during the part of the paying company's taxable year which
precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), owns at least 15% of the outstanding
shares of the voting stock of the paying company.
37
The 15% rate applies where the royalties are paid by an enterprise registered with the BOI and engaged in preferred areas of activities and
also royalties in respect of cinematographic films or tapes for television or broadcasting.
38
The 10% rate applies where the royalties are paid by an enterprise registered with the BOI and engaged in preferred areas of activities. The
20% rate applies in respect of cinematographic films or tapes for television or broadcasting. The 15% rate applies in all other cases.
39
The 15% rate applies if the company paying the dividends is a Philippine company engaged in an industrial undertaking.
40
The 20% rate applies when the recipient is a corporation and during the part of the paying corporation's taxable year which precedes the date
of payment of the dividend and during the whole of its prior taxable year (if any), owns at least 10% of the outstanding shares of the voting
stock of the paying corporation.
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